End of Year Review 2015: Finance and credit unions

The credit union sector continued to grow, with Britain on track to meet a target of two million members by 2020 and global push for 260 million members...

The credit union sector continued to grow, with Britain on track to meet a target of two million members by 2020 and global push for 260 million members around the world by the same year. In banking, the fallout from the crisis at the Co-op Bank continued and the push for mutual alternatives around the world also increased.

Credit Unions

To celebrate 50 years of credit unions in England, the government launched a consultation to find out how it could help the financial providers succeed.

Issues included start-up capital requirements that are too restrictive for new credit unions and unnecessary regulatory requirements. Full coverage of the findings is available here.

In the UK, the sector has grown to include over 1.6m members. Figures published in June from the Bank of England confirmed that credit unions in England, Scotland and Wales reached 1,635,952, an increase of 2.4% from the previous quarter.

In the first six months of 2015, an average of 248 adults joined a credit union each day. In that same period, an additional 16 juniors joined a union per day too.

The total loans to members stood at £1.24bn, with the majority being distributed across Northern Ireland (£520m). Capital held by credit unions was £328m across the UK, while shares equalled £2.3bn.

The Association of British Credit Union’s (Abcul) announced its vision to increase the number of credit union members to two million by 2020. This forms part of a strategy pursued by the World Council of Credit Unions (WOCCU). At a global level, credit unions serve 217m members in 105 countries. WOCCU aims for the global community to reach 260m members by 2020.

2015 also saw the launch of an Armed Forces credit union service, which will enable servicemen and women to save and repay loans via payroll deduction. Three credit unions – Plane Saver Credit Union, Police Credit Union and London Mutual Credit Union – are working together with the Ministry of Defence under the Joining Forces banner to provide savings, loans and a range of credit union services to serving and retired Armed Forced personnel and their families.

Earlier this year a credit union interest group was launched in the European Parliament. The group includes 15 MEPs who sit on the Economic and Monetary Affairs Committee. They meet regularly to discuss about how European Union (EU) policy can create a regulatory environment that better supports and promotes credit unions’ financial inclusion efforts.

The Ecology Building Society explored ethical alternatives in 2015
The Ecology Building Society explored ethical alternatives in 2015

Key events:

MAR: Annual conference and AGM of ABCUL, 6-7 March in Manchester. Workshops on mergers, compliance, best practice in employer partnerships, governance and accounting standards.

JUL: World Credit Union Conference, Denver, 12-15 July. Looking at innovative practices in credit unions and how to engage with Millennials. Anne Cochran elected chair of the organisation. All reports from this conference can be found here.

AUG: Credit Union Compliance Centre Inaugural Conference, 20-23 August, Dublin. Delegates from credit unions across Ireland met in Dublin to discuss on legal and regulatory compliance requirements.

OCT: Manchester Credit Union opened its first branch in the city centre, coinciding with the World Credit Union Day.

Coming up in 2016…

MAR: ABCUL’s AGM and annual conference will take place in 2016 on 11-12 March in Manchester. More information on the conference is available here.

JUL: World Credit Union Conference, Belfast. Registration opens 4 January.

Highs and Lows

Susan Mitchell

Chair of the World Council of Credit Union’s Global Women’s Leadership Network


There was better recognition of the need to focus on women in leadership roles in credit unions. Future chief executive positions are transitioning and we have fewer women applying. GWLN started the dialogue and it is garnering more attention. GWLN momentum is extraordinary with over 1000 members globally, 27 sister societies committed to advancing CU women in leadership and changing lives. Scholarship and empowerment programs are starting new initiatives that impact CU members within communities. Another highlight would be sold out meetings with women and men engaged in the importance of women’s issues.

Low points:

These included seats at the table and strategic influence. We need strong mentors to encourage confidence and to engage in credit union leadership dialogue and more women need to be on boards within the CU system and CUs.

What would you like to see next year (and how do we get there)? 

Women’s issues are relevant and financial empowerment is key to economic growth. Strategies for the future include building GWLN brand to tell the story of the difference we are making, locally and globally. There are many volunteers who are passionate about supporting World Council and GWLN credit union impact. We are going to grow membership, increase scholarships and grants, collaborate with male colleagues to reach more women and connect with women globally through project engagements. To accomplish these goals we will need to communicate and thank our sponsors to secure sustainable growth.

Mark Lyonette

Chief Executive, ABCUL


There have been many highlights this year.  The Credit Union Expansion Project has been through an exciting phase of development and we are now very close to initiating the implementation of a new shared operating model for 36 participating credit unions which will take place through 2016. This is an exciting development which will benefit credit unions through making them more efficient, attractive and convenient. Elsewhere, our efforts to encourage more employers to offer credit union services through payroll deduction got a huge boost with the launch of services for the armed forces through the Ministry of Defence. The Credit Union Foundation’s Lloyds Banking Group Development Fund awarded its first £1m in capital investment to boost credit union growth. And credit unions continue to grow from strength to strength with assets up 12% in the year to June 2015.

Low points:

On the downside, credit unions continue to grapple with falling lending in relation to assets as deposit growth outstrips lending growth on average.  This puts pressure on credit unions’ sustainability as interest income from lending is the main source of income for credit unions.

What would you like to see next year (and how do we get there)? 

The key challenge for next year will be reversing the trend in lending and boosting credit union sustainability. This will be tackled partly by diversifying credit union lending products – something which ABCUL is leading the debate in through bringing together expertise from lending markets such as secured car lending, mortgage lending and credit cards – and partly through attracting younger tech-savvy members.  The second of these will receive a huge boost through the successful implementation of the Cornerstone Mutual Services operating model under the Credit Union Expansion Project. This is no mean feat, with a huge amount of work to do, and the team will be working hard to deliver this throughout the year.

The Co-op Bank has been dealing with the fall-out from its crisis
The Co-op Bank has been dealing with the fall-out from its crisis


In June the Co-operative Bank’s interim results revealed it had made a £200m loss in the first six months of the year.

The interim report shows the bank has strengthened its capital resilience as it continues work to embed and improve the Risk Management Framework, a key focus in both of the Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA) investigations.

The FCA and the PRA reprimanded the Bank for rule breaches, management failures and risk defence flaws for the period from 2008 onwards. It avoided a substantial fine senior figures including its former chair, Paul Flowers, are still under investigation.

In July the Co-operative Bank has published its first Values and Ethics Report since the launch of its expanded ethical policy in January. It addresses five pillars of responsibility: banking, products and services, business, workplace and culture and campaigns.

However in recent months the Bank has attracted criticism from a group of customers for deciding to close the accounts of 20 organisations working for Palestine, including the Palestine Solidarity Campaign. The Bank has also closed some solidarity accounts associated with Cuba and Nicaragua. The Co-op Bank argued it had closed the accounts due to the very high-risk locations where they operated and advanced due diligence checks required by all banks to ensure the funds do not inadvertently fund illegal or proscribed activities.

save our bank2The Palestine Solidarity Campaign (PSC) has launched a legal case against the Co-operative Bank. Meanwhile, Bank customers have launched a campaign to create a union of Co-operative Bank customers, attracting £15,000 during the first two weeks of crowdfunding.

The Save Our Bank Campaign needed £15,000 to register the customer union as a co-op, build its membership, create online participation tools and continue to campaign on ethical banking. Its aims include “building a strong customer voice in how the bank is run”, growing a co-operative stake in the Bank and campaigning for its eventual return to majority co-operative ownership.

Shareholders in the Co-operative Bank were also able to trade their shares through an online auction in September. The Group maintains a 20% stake, with the remainder owned by institutions and private stakeholders.

Throughout the year the News has featured stories on ethical banking, with support from the Ecology Building Society. The stories touched upon a number of topics, including members’ economic participation in co-ops, renewable investment, finding capital in an ethical way and innovations in ethical investment.

The Ecology Building Society has also partnered with Co-operative and Community Finance (CCF) to increase funding available for democratic enterprises in disadvantaged areas. The building society agreed to lend £500,000 to CCF who will use it to stimulate enterprises in deprived areas under the terms of the Community Investment Tax Relief programme.

At international level, co-op banks performed well in 2015, but many faced legislative or regulatory challenges.

Large Indian co-operative banks could lose their co-operative identity after a Reserve Bank of India (RBI) panel recommended they were converted into regular commercial banks.

In Israel a co-operative bank founded in 2012 aims to bring more competition to the country’s financial sector, dominated by two large banks that control over 70% of the market. But the bank still faces hurdles, a main one being that the government has to change the legislation to allow a co-operative to become a bank. More on this here.

Co-operatives are a crucial element in the Italian economy
Co-operatives are a crucial element in the Italian economy

In Italy the resilience of the co-operative banking sector has been questioned after some co-operative banks failed due to heavy loses. In an article for the News, Frances Coppola explains that the co-operative banking sector remains strong in Italy and is also able to sort out its own problems. Nevertheless, she writes, there continues to be confusion between popular banks, which are referred to co-operative banks but as not co-operatives, and credit co-operatives. The later form the network of credit co-operative banks – Banche di Credito Cooperativo.

The sector remains strong in Germany, where the two central co-operative banks have agreed to merge forming the country’s fourth largest bank by assets. After several failed attempts to agree on a merger, WGZ BANK and DZ Bank announced their decision to merge in November. The co-operative financial sector in Germany has 18m members, with co-op banks being the main lenders to small and medium enterprises (SMEs), including co-ops.

Before her election as the new President of the International Co-operative Alliance, Monique Leroux talked to Co-operative News about the state of the co-operative banking sector after her appointment on the Alliance’s International Accounting and Regulatory Affairs Committee. The interview is available here.

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